YOU DECIDE: Is the North Carolina job market turning around?

March 29, 2010

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No other economic statistic receives as much attention as jobs. As well it should, because without jobs, households and families couldn't buy and spend, and the economy would collapse. Therefore, most people judge the condition of the economy by one simple test - are jobs increasing?

The economy has failed the test - big time - in the last two years. Since the recession began in late 2007, the national economy has lost more than 8.4 million jobs, and North Carolina's economy has shed 290,000 jobs.

But what about recently? Is there some evidence the North Carolina job market is beginning to improve? And perhaps even more fundamentally, how will we know when improvement does occur?

Before answering these questions, I have to go on a little detour and provide some background on job statistics. Each month the government does not one but two job surveys. One, called the household survey, contacts people at their homes and asks questions about work and jobs. In the second survey, termed the payroll survey, workers are counted at the businesses where they work.

It's important to recognize both of these surveys are just that - surveys. A total count of jobs is not made. Instead, statisticians devise a sample of both households and businesses, and then use the results to estimate total jobs.

Since there are two job surveys, an obvious question is whether one is better than the other. Unfortunately, each survey has advantages. Economists give thumbs up to the payroll survey because it is a much larger sample (400,000 businesses are surveyed versus only 60,000 households), and therefore, its statistical reliability might be greater. But since the payroll survey counts jobs, if a person holds more than one job, he or she is counted twice.

Because the household survey goes to people rather than businesses, workers who are self-employed or who have jobs at new businesses that aren't yet listed will be picked up by this measure while missed by the payroll survey.

The household survey is where the unemployment rate is calculated, and here there is another twist. To be counted as unemployed, the surveyed individual must indicate she is actively looking for work, meaning she's contacting potential employers and going on job interviews. If she isn't doing these things - even if she's lost her job - she's not counted as unemployed and isn't included in the unemployment rate. Economists call these folks "discouraged workers."

So with this information under your belt, what do the two surveys say about North Carolina's recent job market? After a string of 22 consecutive monthly declines, employment in the household survey has risen in each of the past three months - December 2009 and January and February of 2010. Over this three-month period, more than 10,000 more people in the state reported having a job. Importantly, this increase is after adjusting for typical seasonal variations in the job market.

The payroll survey shows a slightly different trend. Payroll jobs increased in October and November of last year, declined in December, increased in January of this year, but declined in February. So there is no clear pattern. However, prior to October, payroll jobs had decreased for 19 straight months, but now they have increased in three of the past five months. In total, payroll jobs are up by 17,200 since September, although 14,600 of these positions are in government. Once again, typical seasonal patterns are accounted for in these numbers.

But hold on, hasn't the unemployment rate in North Carolina continued to increase? Yes it has, from 10.9 percent late last year to 11.2 percent in February (again, seasonally adjusted). How can the unemployment rate be increasing while jobs are also increasing?

The answer has to do with the aforementioned discouraged workers. As a recession lingers, more unemployed folks give up looking for work and thus fall into the discouraged worker category - unemployed but not officially counted as such. But when economic prospects begin to brighten - as they have in the last few months - some of these folks start knocking on employers' doors again. As they do so, they are added to the ranks of the unemployed, and the unemployment rate is nudged upward.

So taken altogether, my assessment is the job market in North Carolina has improved in recent months. The job situation is better but certainly not great, and it likely won't be great for a long time. Of the 290,000 jobs lost in North Carolina since the recession began, we may get 40,000 of them back this year.

The recession created a big hole, and we're beginning to climb out of it. But to gauge progress, we'll first have to decide how to measure it!

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Dr. Mike Walden is a William Neal Reynolds Professor and North Carolina Cooperative Extension economist in the Department of Agricultural and Resource Economics of N.C. State University's College of Agriculture and Life Sciences. He teaches and writes on personal finance, economic outlook and public policy. The Department of Communication Services provides his You Decide column every two weeks. Earlier You Decide columns are at http://www.cals.ncsu.edu/agcomm/writing/walden/decide.htm